Young v. Forest Oil Co.
Young v. Forest Oil Co.
Opinion of the Court
Opinion by
This is a bill by the lessor of oil land to declare a forfeiture of the lease for failure to develop the land and for damages for draining it from wells on neighboring leaseholds, or in the alternative for a decree of specific performance of the implied covenant, by sinking additional wells. The jurisdiction in cases of this kind is discussed in Colgan v. Forest Oil Company, opinion filed herewith, ante, p. 234, and we need only say now that it must be based and sustained on the ground of actual fraud. The bill is a striking example of the danger of dragging a controversy of this kind into a court of equity, where ordinarily it has no proper place. The bill joins as defendants the original lessee, who had parted with all his title more than seven years before 'bill filed, and all the successive assignees down to and including the Forest Oil Company, appellant, the only one now in possession or claiming title as lessee. No joint title, possession or liability is averred or shown, and all the alleged trespasses, defaults and breaches of covenant by the different assignees of the lease for a period of seven or eight years are pitched together into hotchpot, and each lessee made liable for the sum total, without regard to the statute of limitations, and whether the alleged injury was done before, or during, or after his interest or possession under the lease. As against the oil company, the principal defendant, it is nothing more than an ejectment bill for breach of covenant, and as to the other defendants it is a personal action for damages. It was demurred to for multifariousness and for want of equity. The demurrer should have been sustained on both grounds.
But without reference to the form of the remedy the case is wholly destitute of merit on the facts. The learned judge below found that “ the west end of plaintiff’s farm has been sufficiently developed, but we do not think the one well No. 5 was a sufficient test for the north and east portion of the farm, especially as there was not a trace of oil or gas in it. . . . There remains a large portion of plaintiff’s farm which .... ought
The plaintiff claimed that the lease had expired because oil was no longer produced “ in paying quantities.” The learned judge, while not deeming it necessary to determine the exact meaning of this phrase, nevertheless refused to decree any relief on this ground. In this he was clearly right. The phrase, “found or produced in paying quantities,” means paying quantities to the lessee or operator. If oil has not been found, and the prospects are not such that the lessee is willing to incur the expense of a well (or a second or subsequent well as the case may be), the stipulated condition for the termination of the lease has occurred. So, also, if oil has been found but no longer pays the expenses of production. But if a well, being-down, pays a profit, even a small one, over the' operating expenses, it is producing in “ paying quantities,” though it may never repay its cost, and the operation as a whole may result in a loss. New wells except the very largest x-epay cost under a considerable tixne; many never do, but that is no reasoxx why
Decree reversed, and bill directed to be dismissed with costs.
Reference
- Full Case Name
- Andrew B. Young v. Forest Oil Company
- Cited By
- 36 cases
- Status
- Published
- Syllabus
- Lease — Oil and gas lease — Equity—Specific performance — Sinking additional well — Multifariousness. Where a bill in equity to enforce covenants in an oil lease joins as defendants the original lessee and a large number of successive assignees of the lease, and no joint title, possession or liability is averred or shown, and all the alleged trespasses, defaults and’breaches of covenant by the different assignees for a period of seven or eight years are pitched together into hotchpot, and each lessee made liable for the sum total, without regard to the statute of limitations, and whether the alleged injury was done before, or during, or after his interest or possession under the lease, the bill is demurrable for multifariousness and for want of equity. Where a lessee under an oil and gas lease has entered upon land and sunk wells he is entitled, in determining whether he shall sink additional wells, to follow his own judgment. If that is exercised in good faith, a different opinion by the lessor, or the experts, or the court, or all combined, is of no consequence, and will not authorize a decree interfering with him. A bill in equity will not lie by the lessor of an oil and gas lease against the lessee or his assigns, to compel the latter to test part of the leased land not yet drilled, or, upon his failure to do so, to surrender the land to the lessor, unless it is shown that the failure of the lessee to drill amounts to a fraud upon the rights of the lessor. Oil and gas lease — Termination of lease— “ Found or produced in paying quantities.'1'1 Where a lease is to continue as long as oil or gas is found or produced in paying quantities, the phrase, “ found or produced in paying quantities,” means paying quantities to the lessee or operator. If oil has not been found, and the prospects are not such that the lessee is willing to incur the expense of a well (or a second or subsequent well as the case may be), the stipulated condition for the” termination of the lease has occurred. So, also, if oil has been found, but no longer pays the expenses of production. But if a well, being down, pays a profit, oven a small one, over the operating expenses, it is producing in “ paying quantities,” though it may never repay its cost, and the operation as a whole may result in a loss. The phrase “paying quantities,” therefore, is to be construed with reference to the operator, and by his judgment, when exercised in good faith.